Slovak Prime Minister Robert Fico called for talks with Ukraine, Russia and the European Commission to ensure his country gets paid and that it can reverse gas flows to Kyiv without violating existing contracts, while Hungary said it could do so at once.

Financially-strapped Ukraine has been anxious to obtain affordable natural gas since Russia tore up a discount negotiated under Kyiv’s former president Viktor Yanukovich and this month raised the price it must pay for gas from Russian supplier Gazprom by 80%.

Relations between Ukraine and Russia have been in crisis since the pro-Russian Yanukovich was ousted by protesters seeking closer ties with Europe, prompting Russia to seize and annex Ukraine’s Russian-majority Crimea region.

The gas price hike from $268.50 per 1,000 cubic meters to $485.50 imposed by Moscow on Kyiv could cut gas supplies from Russia to the EU through Ukrainian territory, Yuriy Prodan, Ukraine’s minister of energy and coal industry said recently [read more].

“The optimal solution would be a meeting of representatives of Ukraine, Slovakia, Russia and the European Commission, to discuss conditions under which Slovakia would be involved in reverse flow of gas,” Fico told a news conference posted on the government’s website.

Slovakia is the EU’s best-placed member nation to pump gas to neighbor Ukraine should Russia reduce or shut off supplies from the four pipelines that feed Slovakia via Ukraine.

But reversing flows along any of these pipelines would breach terms of contracts with Gazprom, a spokesman for Slovak pipeline operator Eustream said this week.

However, in Budapest, Foreign Minister János Martonyi said on Thursday Hungary was ready to start shipping natural gas to neighboring Ukraine “at any time” and the technical conditions for starting the reverse pipeline flows are in place.

Hungarian national news agency MTI also quoted Martonyi, who met Ukrainian Deputy Minister for Foreign Affairs Danilo Lubkivsky in Budapest, as saying that Budapest firmly backed Ukraine’s territorial unity and believed the annexation of Crimea by Russia was illegitimate.

Hungary is a smaller potential gas source than Slovakia but its pipeline network operator FGSZ Zrt said earlier on Thursday in reply to emailed questions that Hungary could ship 16.8 million cubic meters (mcm) of gas per day to Ukraine.

“The technical and legal conditions for shipping …gas into Ukraine have been in place in Hungary since March 2013,” FGSZ said.

Russia is Europe’s biggest gas supplier, providing around a third of continental demand, which at current daily flows of 270 (mcm) is worth almost $100 million a day. Around 40% of Russian gas is currently exported through Ukraine and some of it further through Slovakia.

Fico said the Slovak government was investigating whether there were technical solutions to reverse flows without infringing contracts or incurring sanctions.

One possibility could be to allow flow reversal along a pipeline from Vojany to Uzhorod in Ukraine which could supply 9 billion cubic meters of gas per year, he said.

He added that his European Union member nation also needed to make sure it gets paid for taking such steps and for any gas shipments to Ukraine, and needed guarantees from a third party such as the EU.

“We want to help but we do not want the idea take root that nobody will pay for such services,” Fico said.

Ukraine missed a deadline this week to pay Gazprom $2.2 billion for gas it has received.

Fico said he saw a risk in low levels of gas reserves in storage in Ukraine which could affect its ability to ship gas to Europe. He said an extra $5 billion worth of gas was needed to be added to Ukrainian storage sites.

Stocks cushion blow

Reversing flows from West to East requires excess gas to be pumped out of storage from within the EU. Healthy stocks following a mild winter would cushion the effects of a shortfall in Russian supplies.

Gas inventories in Germany, Europe’s top gas consumer and Russia’s largest consumer, are currently 58% full and hold the equivalent of 53 days of average daily gas consumption.

Polish inventories are almost 70% full, enough to meet 28 days of demand, while the Czech Republic’s gas storage facilities are 40% full and can meet 20 days of demand.

Because these are annual figures averaged between high demand winter days and days of low gas usage in summer, stocks going into the warmer spring and summer seasons would likely last longer than indicated.

“In the short run, Europe could easily survive a complete loss of Ukrainian transit flow until the end of October,” said Mikhail Korchemkin, director of U.S.-based consultancy East European Gas Analysis.

“Flows would likely go on through Yamal-Europe, Nord Stream,” he said, referring to Russian pipelines carrying gas into Germany through Belarus and via the Baltic Sea.

Korchemkin acknowledged, however, that a total cut-off of Russian gas next winter would be very difficult for Central Europe to handle.

Background

The crisis in Ukraine erupted after its former President Viktor Yanukovich cancelled plans to sign trade and political pacts with the EU in November 2013 and instead sought closer ties with Russia, triggering protests that turned bloody and drove him from power.

Moscow annexed Crimea in March following a referendum staged after Russian forces established control over the Black Sea peninsula in the biggest East-West crisis since the Cold War.

Slovakian reverse flow is going to be pivotal for Western European gas supply security this winter. If Gazprom do decide to cut Russian gas supplies to Ukraine then the small amount of storage gas that Ukraine currently has in the ground will quickly be used for domestic needs at the start of winter. Without at least 17 BCM of storage stocks then Gazprom and the EU estimate that there will be a serious risk to supply interruption through the Velke pipeline. http://www.peakvol.com This pipeline supplies Europe with about half of its Russian gas and any interruption of supply would have… Read more »